Draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022

Tulip Siddiq Excerpts

Monday 18th July 2022 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve with you in the Chair, Ms Ali.

The Opposition are committed to supporting the global effort to combat money laundering and the financing of terrorism. The Minister will be pleased to hear that we are broadly supportive of the draft regulations and will vote in favour of them. We welcome, in particular, the new travel rule for cryptoassets and the duty on regulated firms to carry out continuous anti-money laundering checks. I am sure the Minister will agree that many of the measures could have been introduced months ago. We are still waiting for the long overdue second economic crime Bill, so perhaps the Minister will be able to update me on the Government’s progress on that.

I have a number of questions about the draft regulations. As before, I am happy for the Minister to write to me if he does not have the answers to hand. First, on the regulations on cryptoasset firms, I welcome regulation 5, which requires cryptoasset firms to record information on the sender and receiver of cryptoasset transfers. That will introduce much-needed transparency to the sector, but it will not come into effect until September 2023. The Minister will be aware that kleptocrats linked to Russia are rushing to convert their assets into cryptocurrencies to avoid the sanctions put in place in response to Russia’s invasion of Ukraine. What assessment has the Minister made of the risk that the delay in implementing the regulations will allow Kremlin-linked individuals to avoid sanctions?

I also have a question about regulation 10, which removes the obligation to build a bank account portal. Transparency International has warned that that will leave the UK’s anti-money laundering regimes significantly weaker than the EU’s. Spotlight on Corruption believes that a portal would have allowed law enforcement and anti-money laundering supervisors to access information on the identity of holders and beneficial owners of banking payment accounts and safe deposit boxes, therefore supporting criminal investigations and the recovery of the proceeds of crime. Why did the Minister arrive at a different conclusion from the anti-corruption experts, despite the Government not even publicly consulting on regulation 10?

The Minister said that the Government decided not to build a bank account portal because of the potential cost to the public and private sector. Could he set out the estimated costs to the public and private sectors of building the portal? Again, if he does not have the information to hand, I am happy to have it later. Could he explain the method used to determine that the cost outweighs the potential benefits of a portal to our economy and society as a result of increasing the capacity of enforcement agencies to investigate and recover the proceeds of crime?

Let me turn now to the consequences of the draft regulations not applying to the UK’s Crown dependencies —the Channel Islands and the Isle of Man. The Secondary Legislation Scrutiny Committee in the other place highlighted that this is a potential cause of concern because it risks bad actors in the UK financial services sector moving to the Crown dependencies to avoid anti-money laundering checks. Could the Minister confirm whether he will work with his equivalents in the Crown dependencies to ensure that the changes introduced today are reflected in their regulatory regimes?

Finally, I want to ask the Minister about the relationship of the draft regulations to the Economic Crime (Transparency and Enforcement) Act 2022 and its long overdue second part. The statutory instrument makes minor changes to the 2022 Act to ensure that discrepancies in company records are reported in a timely manner. That seems sensible enough, but does the Minister accept that it will have little impact if the Government continue to delay the second economic crime Bill and a reform of Companies House? We have been promised the Bill for months, but it is yet to materialise. Can the Minister update us on the timetable for the Bill?

The Minister will be happy to know that the Opposition support the draft regulations, but I hope he can address some of the concerns I have outlined.